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Most traders use support and resistance levels to determine buy and sell signals, but have traders question the significance of these levels? Technical analysts believe strongly that traders and investors have price memories affecting them when they make trades.
For example, they will remember the highest price of the stock they traded have reached. The memory will be stronger if there are emotions attached to it. If the trader had not sold the stocks at its high, he will be disappointed and will want to get even with the market. He is then inclined to hold on and sell when the stock price went back the ‘high’ that he remembered. This makes the price high the resistance level that we are talking about. - it becomes a price where many people will let go of their stocks. The vice versa happens at the support level. As the stock goes up, many traders will deem it expensive and they last remembered the price when it was ‘cheap’. They are unwilling to buy now but will invest if the price goes back to the ‘cheap’ price. Hence, if the stock price reach this level, many trades tend to go through and price becomes stagnant at this level.
How to benefit from support and resistance level?
There are 2 methods to trade support and resistance levels.
Read more...[caption id="attachment_2564" align="alignright" width="144" caption="Photo by Tony the Misfit"][/caption]
Most traders use support and resistance levels to determine buy and sell signals, but have traders question the significance of these levels? Technical analysts believe strongly that traders and investors have price memories affecting them when they make trades.
For example, they will remember the highest price of the stock they traded have reached. The memory will be stronger if there are emotions attached to it. If the trader had not sold the stocks at its high, he will be disappointed and will want to get even with the market. He is then inclined to hold on and sell when the stock price went back the ‘high’ that he remembered. This makes the price high the resistance level that we are talking about. - it becomes a price where many people will let go of their stocks. The vice versa happens at the support level. As the stock goes up, many traders will deem it expensive and they last remembered the price when it was ‘cheap’. They are unwilling to buy now but will invest if the price goes back to the ‘cheap’ price. Hence, if the stock price reach this level, many trades tend to go through and price becomes stagnant at this level.
How to benefit from support and resistance level?
There are 2 methods to trade support and resistance levels.
Read more...
[/caption]
Most traders use support and resistance levels to determine buy and sell signals, but have traders question the significance of these levels? Technical analysts believe strongly that traders and investors have price memories affecting them when they make trades.
For example, they will remember the highest price of the stock they traded have reached. The memory will be stronger if there are emotions attached to it. If the trader had not sold the stocks at its high, he will be disappointed and will want to get even with the market. He is then inclined to hold on and sell when the stock price went back the ‘high’ that he remembered. This makes the price high the resistance level that we are talking about. - it becomes a price where many people will let go of their stocks. The vice versa happens at the support level. As the stock goes up, many traders will deem it expensive and they last remembered the price when it was ‘cheap’. They are unwilling to buy now but will invest if the price goes back to the ‘cheap’ price. Hence, if the stock price reach this level, many trades tend to go through and price becomes stagnant at this level.
How to benefit from support and resistance level?
There are 2 methods to trade support and resistance levels.
Read more...
